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The Maturing of the ADEA

September 27, 2002
Related Topics: Discrimination and EEOC Compliance, Featured Article
With little hoopla, the Age Discrimination in Employment Act celebrates its35th birthday this year. Created in 1967 as an amendment to the Fair LaborStandards Act, the ADEA protects people age 40 and older from discrimination onthe basis of age. That means that under federal law, a company can’t use aperson’s age to make negative decisions regarding hiring, firing, promotions,transfers, or pay—as long as that person is 40 or older. It sounds simple. Butas our workforce gets grayer, the law is being tested, and complications arearising. Larry Lorber, a partner in the Washington, D.C., office of ProskauerRose LLP, says that the ADEA is beginning to show new wrinkles.

How is ADEA case law changing?
    As the law develops under the ADEA, you’re finding more mature issues whichhaven’t been faced yet. These issues just haven’t come up because eventhough the ADEA is 35 years old, it’s a more limited statute: You can’tdiscriminate on the basis of age. But now the United States has an agingworkforce. We’re also, in this economy, seeing the need to cut payrolls andhow that applies to employees’ age. All those issues which never really had aface in many respects are now coming out. So we’re finding that more subtleissues concerning benefits are coming to light. We’re also seeing disparateimpact as applied to the age act becoming a major issue.

How does a disparate-impact claim come up under the ADEA?
    When companies go through major layoffs, they often try to eliminate peopleat higher pay levels. The employees who generally hold those positions are age40 or older. So if these older workers get laid off disproportionately toyounger workers, they may make a disparate-impact claim. The issue right now is,does the ADEA recognize a course of action under disparate impact? Last year,the Supreme Court agreed to review a circuit court case filed against FloridaPower. It would have been helpful in giving some answers about what ADEA doesand does not cover. The issue was: When a layoff occurs and it turns out thatolder workers were disproportionately terminated, is there a case under the ADEAfor disparate impact? Ultimately the Supreme Court decided not to review thecase, but the question remains.

What has the trend been so far concerning this issue?
    Courts have said that even though older people tend to get paid more, jobreductions directed at limiting payroll costs are not necessarily [linked to]age discrimination. You can’t necessarily make the connection between highersalary and age for purposes of ADEA. But the issue is sitting there, waiting forsome final ruling by the Supreme Court as to what it really means.

A recent high-profile ADEA case concerned not hiring or firing, but benefits.What is the basis of this case?
    The Sixth Circuit Court case, Cline v. General Dynamics Land Systems Inc.,claims reverse discrimination under the ADEA. The question there is: If youoffer a benefit to people who are 50 or older, are you violating the ADEA if youdon’t offer that same benefit to people 40 to 49? The issue in the case isthat General Dynamics used to give full health benefits to retired workers with30 years of seniority. In July of 1997, a new collective-bargaining agreementrevoked those health benefits—except for employees who had reached the age of50 at the time that the contract was changed. In other words, if you were 50 orabove, you were grandfathered in. If you were under 50, you lost your promise offull health benefits after retirement.

So what was the basis of the complaint?
    The question concerned employees over 40 but under 50. They claimed agediscrimination, a type of reverse age discrimination because they’re oldenough to be covered by the ADEA, but too young to be included in the newhealth-benefits arrangement.

What was the ruling?
    The 2-to-1 ruling by the circuit court panel said there was reversediscrimination. They said that the ADEA protects employees 40 and older, andthat the health-benefits ruling in effect discriminated against older workers—age40 to 49—who are covered under the ADEA yet are younger than those employeesover 50 who were benefiting.

What happens next in the case?
    General Dynamics has requested that the entire Sixth Circuit Court, not justthe panel, rehear the case. If that’s denied, the question then is whetherGeneral Dynamics will petition the Supreme Court for review. They’ve alreadychanged their policy, so there’s a question as to whether General Dynamicswants to appeal something which really doesn’t affect them anymore.

This sounds like it could have far-reaching effects.
    It could be a big issue. There are lots of benefits policies in which thestarting age is not 40 but something older than that. A lot of severance plansconsider age 55 and above as qualifying for early retirement. If the theory ofthis case stands, you have all sorts of questions. One big one is, can you haveearly-retirement options that start later than age 40? The question consideredin the General Dynamics case is going to become more and more important, becauseyou keep reading about cutbacks in medical benefits. If companies en masse startgrandfathering in certain senior levels of employees, you’re going to findcases challenging that under the ADEA. It’s going to be a major concern of thebenefits folks. It’s a big deal.

If you’re going to make changes in policies, try to ensure that you have ajustifiable business basis for the change before you enact it.

How can HR professionals avoid problems under the ADEA while these issues getsorted out?
    If you’re going to make changes in policies, try to ensure that you have ajustifiable business basis for the change before you enact it. So if you’regoing to try to cut payroll, make sure you have records showing you’re makingthe cut for specific business reasons. This may insulate you against adisparate-impact claim. [It shows that the cuts are part of an overall businessplan rather than an attempt to weed out older workers.] As you work with yourbenefits advisers, you need to be cognizant of the ADEA—that it can and doesapply to a wide range of issues.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

Workforce, October 2002, pp. 86-87 -- Subscribe Now!

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